MUMBAI: Minister of information and broadcasting M Venkaiah Naidu, writing for a business newspaper, opined: “At the midnight of June 30, India will make a tryst with history by heralding the much-awaited GST regime and turning a new leaf in the annals of the country’s taxation system.”

“There might be some teething problems initially, but, in the long run, GST will help both the traders and consumers as it will cut down red tape — there will be no inspector raj, harassment by taxmen or check posts at borders. The officers will have no discretionary powers. It will ensure transparency, reduce inflation, bring down prices, improve ease of doing business, create a level-playing field, increase tax compliance and help achieve higher economic growth.”

The aim of the Goods and Services Tax (GST) — one nation, one tax — may be lofty, but clearly many segments of the media business don’t seem to agree with Naidu’s optimism — at least in the short term. And, television and film production houses are one such category.

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Executives at production houses feel accounting and operational processes would definitely escalate, thus needing more staff in a largely insecure business environ, although most are hopeful that irritants would iron out in the long run.

“Accounting and operational processes would increase to a large extent. I am sure we would learn, adjust and settle down in the new system,” said Swastik Production producer Rahul Kumar Tewary. Although, he feels there wouldn’t be much impact on the television industry owing to a new indirect taxation regime that GST seeks to usher in, he explained, “The producers will claim additional tax from the broadcasters who, in turn, will recover it from the advertisers.”

In fact, a uniform tax system will help the largely unorganised industry become organized and, according to Tewary, it will “benefit the content makers and producers” who will get more input credits under GST as there will be no distinction between service tax, entertainment tax and VAT. However, the paperwork will definitely increase. Neela Telefilms director Asit Modi admitted paperwork will be a “big problem”, especially when shooting outdoors as then production houses will have to file “three (tax) returns in a month.” His worry is compounded by the fact that more paper work would warrant employing more human resources in the presently financially insecure production business.

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Still & Still Media Collective founder Amritpal Bindra pointed out some big impacts of GST. Dubbing increased tax filings a “clerical impact” of GST, he said, “Administrative hassle in the beginning will lead to a simplified tax structure substituting multiple taxation in the long run.”

Pointing out that high taxation (28 per cent) on movie tickets priced over Rs. 100 would be a challenge for the industry, Bindra explained teething pains as paving the way for “transparency, unique management, discipline and good corporate governance in the industry.”

The reason for his relaxed attitude towards GST? “We have been trying to pay more people through cheque and also insisting on raising relevant invoices so that our partners could pay taxes in their individual capacities. Unlike the norm of 90-120 days payment cycle in the industry, we make sure the vendor is paid within 30 days after raising an invoice,” Bindra explained.

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Some executives are approaching the new system differently. Contiloe Pictures COO Anup Vijai is looking at the new tax regime in two parts — commercial and compliance. “There is a cost perspective and the other is process compliance,” he remarked, “We are a production house that is subjected to service tax. When we raise an invoice for a TV channel, we add service tax separately. We believe that GST would lead to reduction in costs, but are unclear on the process of filing the new tax.”

Some other production house leaders complained about the new tax regime, nevertheless. Hats Off Production founder JD Majethia said that more funds would get blocked as they would have to pay the actors in advance and, according to him, things such as makeup, food and vanity van, covered under GST, would become expensive.

“Under GST, the cost of food provided to actors could be set off, which is good. But, if we ordered from hotels (outdoor catering), it may be dearer under the new regime,” Majethia said. He expected the situation to be prevalent for a couple of years, but hoped GST would boost economy.

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Another production house executive chided the government for “poor marketing” of the new tax system. Paperback Films co-producer Pradeep Kumar found GST to be beneficial, but was unhappy about its marketing and lack of a thorough awareness and literacy drive about GST.

“GST may hurt because there will be a penalty for delayed or missed payment of GST,” he said, adding, “We would have to ensure that vendors and caterers, etc raised invoices by the end of every month so that we are in a position to do the taxation process in the next ten days.” He also described a surge in tax from 10 to 15 per cent as “tax terrorism”, saying that GST may simplify taxation in the long run, but an increase in the quantum is a “liability”.

Whoever said `no pain, no gain’ probably had GST in mind and for the media industry and production business, in particular, it seems to be quite true. The long-term simplification of a multiple taxation regime brings along pains in the form of short-term uncertainties as India is still largely a cash-economy and formal invoices and a process-driven system a rarity.

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ALSO READ:

http://www.indiantelevision.com/regulators/ib-ministry/gst-benefits-come-with-daunting-compliance-increased-paperwork-say-sector-stakeholders-170628

http://www.indiantelevision.com/dth/dth-operator/under-gst-taxes-on-cable-dth-entertainment-services-to-come-down-170523

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